Luxembourg

Details

  • Service: Tax, Financial Services
  • Industry: Financial Services, Banking
  • Type: Newsletters
  • Date: 1/8/2013

Contact

Gérard Laures

Partner

Tel. +352 22 51 51 - 5549

gerard.laures@kpmg.lu

 

Frank Stoltz

Partner

Tel. +352 22 51 51 - 5520

frank.stoltz@kpmg.lu

Qualified Intermediary News - Issue 2013-01 

January 2013

2012 Tax Act Extends Rates & Treatment of Various Distributions

 

On January 2, 2013, President Obama signed the American Tax Relief Act of 2012 (the Tax Act) averting the “fiscal cliff” of tax increases. From a withholding and information reporting perspective, the Tax Act includes provisions that:

 

  • Extend permanently the 2001 and 2003 current individual income tax rates except for taxpayers with taxable income above a threshold amount ($450,000 for married individuals filing a joint return and $400,000 for single taxpayers)
  • Extend the current tax rates on capital gains and dividends except for taxpayers with taxable income above $450,000/$400,000 (joint filers/singles); for these taxpayers the capital gains and dividend tax rate is 20 percent (not including the 3.8% tax on investment income imposed by the Affordable Care Act, which takes effect on January 1, 2013)
  • Extend many expired provisions, through 2013.

 

Backup withholding rate remains at 28 percent

 

If Congress had failed to act and allowed the tax rates to revert to their pre-2001 levels, the backup withholding rate would have increased to 31 percent. However, with the passage of the Tax Act, the lower tax rates remain in place. As a result, the backup withholding rate, which is linked by IRC section 3406 to the 4th lowest marginal rate for unmarried individuals, remains at 28 percent.

 

RIC dividend treatment

 

The Tax Act extends retroactively for tax years beginning after December 31, 2011, through tax years ending before January 1, 2014, a provision allowing a regulated investment company (RIC), under certain circumstances, to designate all or a portion of certain dividends as an "interest-related dividend" or a "short-term capital gain dividend."

 

Treatment of RIC investments under FIRPTA

 

The Tax Act also extends retroactively from January 1, 2012 through December 31, 2013, the inclusion of a RIC within the definition of a “qualified investment entity” under the Foreign Investment in Real Property Tax Act (FIRPTA) rules.

 

Tax-free distributions from IRAs for charitable purposes

 

For distributions made in tax years beginning before January 1, 2014, the Tax Act extends the provision that permits tax-free distributions to charitable organizations from an IRA of up to $100,000 per taxpayer, per tax year.

 

For your reference

 

IR 2012-98 can be accessed here :  IR 2012-98.pdf (176 KB) 

 

For further information, please do not hesitate to contact us.

 

 

 

 

 

 

The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. 

 

 

Share this

Get in touch with KPMG